Economic Signs May Be Improving, but Times Still Tough for Israel’s Poor

November 25, 2003

JERUSALEM (Nov. 24)

Crumbs tumble down Yigal Alperson’s white beard as he eats his one guaranteed meal of the day at a crowded Jerusalem soup kitchen.

Tables spill over with immigrants, the elderly and single mothers, the predominant faces of Israel’s poor as the country’s economy is battered seemingly from every direction.

Three years of Palestinian violence have scared away investors, a worldwide economic downturn has devastated Israel’s once thriving high-tech industry, factories are closing because of foreign competition, and government cutbacks in welfare and social spending in response to a $6 billion deficit have taken their toll.

“My situation is difficult. We don’t have anything to eat,” says Alperson, 66, an unemployed statistician who supports his wife and five children on the $888 he receives each month from Israel’s national insurance system.

“This is security, you know,” he said pointing to a plate piled high with steaming pasta, chicken cutlets and green beans at Meir Panav, a soup kitchen designed to look like a restaurant. “At least you know you’ll be eating today.”

Israel’s unemployment rate is near 11 percent, almost 18 percent of families are living in poverty and the number of poverty-stricken children is on the rise. Israel now has one of the highest poverty rates in the developed world, according to 2002 statistics released recently by the National Insurance Institute.

A study of some 150,000 households, released this month by the JDC-Brookdale Institute, found that 8 percent were having severe difficulty buying enough food.

Meanwhile, Finance Minister Benjamin Netanyahu’s announcement last week that Israel’s recession was over sparked a storm of protest. Netanyahu swiftly backtracked from his remarks, saying instead that there were signs of economic recovery.

Exports are up and that’s a good sign, said Karnit Flug, who heads the Bank of Israel’s research department. The stock market also has risen in recent months.

But it’s still too early to tell if Israel is headed toward better economic times anytime soon, Flug said.

There is a lot of uncertainty about the “security issue and prospects for improvement of the geopolitical situation,” Flug said. “The ability of Israel to utilize its potential growth will depend on improvement in these areas.”

The government has argued that the economy’s problems stem not only from the intifada but from more inherent problems in the structure of Israeli industry. To address these problems, Israel is trying to privatize many state-owned companies to boost competitiveness.

It has begun aggressively deporting foreign workers, whom government officials say take jobs away from Israelis and bring down wages for unskilled labor. The 1990s saw a dramatic increase in foreign workers in Israel. With 200,000 foreign workers, the Jewish state has one of the highest rates of foreign laborers in the world, experts say.

Whether or not Israelis are interested in taking these unskilled jobs remains to be seen.

Another government project, reducing welfare support payments for the poor, is expected to increase poverty rates, the JDC-Brookdale study found.

By setting a time limit for unemployment benefits, for example, the government hopes to encourage people to go back to work. But in Israel’s present economy, finding work is increasingly difficult.

The reforms “in the short term create a lot more poverty,” said Jack Habib, a social economist who directs the JDC-Brookdale Institute. “More people are in need, but all the services they need are being cut back.”

Rabbi Yechiel Eckstein is the president of the International Fellowship of Christians and Jews, which funds soup kitchens across the country, as well as a network of warehouses where the needy can receive free furniture and other household goods.

The government is embarrassed by how its stringent new fiscal policies are affecting the country, Eckstein claims.

Such policies “have changed the face of Israel. Now the question is how to portray the public image of Israel,” Eckstein said. “No one wants to portray it as a third-world nation, but to portray it as an idyllic place where everything is hunky-dory is morally and practically wrong.”

The government is defending its policies, taking out ads in the national press saying the reforms are the only way to help the economy. Netanyahu says the cuts are necessary if Israel wants to have a modern economy.